ESG Aversion: Experimental Evidence on Perceptions and Preferences

We develop an experimental framework to identify the belief-based and taste-based drivers of demand for Environmental, Social, and Governance (ESG) partnerships. Our study implements two symmetric experiments with real startup founders and venture capital (VC) investors, who evaluate hypothetical profiles under the understanding that their responses will inform an algorithm generating personalized real-world matches. We find a significant ESG penalty: profiles randomly labeled with ESG attributes receive substantially lower collaboration interest from both founders and VCs. This penalty is primarily driven by negative performance beliefs—ESG-labeled profiles are perceived as less profitable and less accessible. To isolate taste-based preferences, we further implement a willingness-to-pay experiment in which participants may forgo part of a lottery reward to receive additional match recommendations of comparable quality. Participants randomly offered ESG-oriented recommendations are now significantly more likely to pay, revealing a latent preference for ESG once performance concerns are held constant. These findings highlight a tension between financial returns and personal values: in current market conditions, concerns about profitability obscure an underlying taste for ESG.